Fractional dynamics in Japanese financial time series
Using the spectral regression and Gaussian semiparametric methods of estimating the long-memory parameter, we test for fractional dynamic behavior in a number of important Japanese financial time series: spot exchange rates, forward exchange rates, stock prices, currency forward premia, Euroyen deposit rates, and the Euroyen term premium. Stochastic long memory is established as a feature of the currency forward premia, Euroyen deposit rates, and Euroyen term premium series. The martingale model cannot be rejected for the spot, forward, and stock price series.
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